Question

Assume that a consumer purchases a combination of product A and product B such that the MUa/Pa = 10 and MUb/Pb = 12. To maximize utility without spending more money, the consumer should

Answer 1

Ans: To maximize utility without spending more money, the consumer should purchase more units of product B and less of product A.

Explanation:

MUa/Pa = 10

MUb/Pb = 12

As the consumer purchases more units of a product , then the marginal utility from that product will start to diminish after a certain level or units of purchase of that product.

Utility maximization condition is where ;

1. Entire given money outlay must be spent on both the goods.
2. MU_A / P_A = MU_B /P_B